Smith and Partners Legal Advice

Employment Law – recent Hobbit amendment

2011-01-10T12:27:00.001-08:00

Following the news that Warner Bros. Studios were considering pulling the Hobbit movie from production in New Zealand over fears about industrial action, the Government announced a new amendment to the Employment Relations Act 2000.

Alongside granting the filmmakers a $13 million marketing subsidy and $20 million dollar tax break, the government has amended laws around the distinction between independent contractors and employees.

This law change has resulted in the studio’s decision to keep the Hobbit films in New Zealand.

What Does the Law Amendment Mean?

Under the previous law, independent contractors (such as film workers) could be legally considered employees. Despite a contact defining a worker as an
“independent contractor”, the courts have the right to define that worker as an “employee” with all the rights thereof.

If the courts felt the nature of a contractor’s relationship was more akin to that of an employee, that contractor could claim employee rights and conditions.

The new amendment – called the Employment Relations (Film Production) Amendment Bill – classifies all film production workers as independent contractors by default. The new law only affects contractors working in the film industry.

This law does not prevent film workers from entering into employment agreements, but may make it more difficult for them to find an employer willing to sign an employment agreement.

The new law change has been met with both support and criticism.

Prime Minister John Key said, “We’re not talking rights away from workers. This is commercial reality. Without it these movies wouldn’t be made in New Zealand.”

Minister of Labour Kate Wilkinson added. “The law provides certainty to the film industry in New Zealand, an industry that is worth $2.8 billion to our economy … it clarifies what is already widespread industry practise – that actors, crew members and other production personnel in the film industry who sign on as independent contractors are just that, independent contractors.”

But some, such as Council of Trade Unions President Helen Kelly, worry the move could set a precedent. “If this is their response to this corporation- what about the next corporation and the next corporation?”

Most, however, seem happy with the bill, which has secured the Hobbit movie for New Zealand and ensured many more years of work for our film industry.

GST Increase and Your Business

2011-01-10T12:24:00.000-08:00

From 1 October 2010, the National Government increased GST (Goods and Services Tax) in New Zealand from 12.5% to 15% on all products.

By now, most businesses should have implemented the change and need to ensure all processes account for the new GST.

Many businesses are concerned about the increase. Skyrocketing prices of raw materials and manufactured goods along with decreasing consumer spending has left many wondering if further price hikes will drive customers away. As a result, many are choosing not to increase prices in-line with the increase, eating in to their already slim profit margin.

If you’re in business, you’ll need to take account of the following issues surrounding the GST increase:

First, you’ll need to decide if you’ll be raising prices to reflect the increase in GST. While many business are choosing to leave their prices as they are to retain customers, others are using the GST increase to evaluate their pricing strategy altogether, often resulting in higher overall prices reflecting both the GST increase, an increase in value of products and services, and the current financial climate.

How will the GST increase affect marketing strategies? You may wish to create a new marketing campaign around the GST increase.

Will the GST increase affect your staffing and employment? For example, you may need to pay employees overtime to cope with the additional demands of the change, or hire contractors to assist you with the change.

Will your accounting, invoicing and other software packages cope with the GST increase? You may need to update or rewrite your programmes to accommodate the new GST.

What are the legal and financial aspects of your business be affected by the GST increase?

Companies with contracts spanning the GST increase may run into problems. If two different rates of GST apply during a contracted period, changes will need to be made to the documentation and a new payment schedule may need to be established.

Those who issue GST inclusive contracts will need to be especially cautious.

You may need to contact your lawyers, accountants and attorneys for advice on legal and financial matters.

The GST increase has proved a stressful event for many business owners. It’s important that any issues – especially legal and financial problems – are dealt with as soon as possible to ensure your business continues to function moving forward into 2011.

Buying a business

2010-09-22T14:56:00.000-07:00

Buying an existing business is an important financial decision and should not be rushed. With assistance from your accountant and lawyer, you should carefully consider all aspects of the business purchase. Some of these considerations are listed below.

The sale and purchase agreement

A written agreement is recommended to prevent future confusion or disputes.
When you buy a business, you can use a standard business sale and purchase agreement (available from the Auckland District Law Society), write one yourself, or instruct your lawyer to write one. It is important to ensure that the agreement is thorough and clear, and covers all aspects of the agreement, including the names of the buyers and sellers, the business being sold, the price, terms of payment and warranties, any special conditions such as finance, approval of the agreement and lease, restraints of trade, due diligence and so on.

The sale and purchase agreement needs to be reviewed thoroughly by both you and your lawyer before you sign it.

Financial aspects of the business

Study the company’s accounts for the last three – five years. You need to know if the business is in sound financial condition and is able to provide the return you are looking for. Consult your accountant and lawyer to assess industry operating ratios, the turnover figures, goodwill and so on. Take your time with this. Before you purchase the business, you should objectively assess whether the business is in sound condition, fulfilling the needs of its market, and is able to offer what you want.

What’s included in the business purchase?

If plant is included in the sale, assess how it has been valued – a going concern or salvage value. Consider any patents, intellectual property, licensing and lease agreements too. How old is the stock? Has it been priced accurately? Ask your lawyer to assess what exactly is being sold – the business, its assets or its shares?
Use all the information you can gather to assess what your two – three year profits will be. Try to take everything into account to come up with best and worst case scenarios. Critically assess your projected cash flow – will you be able to pay back the bank?

You will also need to consider the most appropriate business structure (ie, family trust, company, partnership, sole trader), insurance and GST. Like any legal transaction, we strongly recommend you get good legal advice from Smith and Partners before you make a decision. Getting good advice at the beginning of the process could save you a lot of money and heartache in the long run.

Corporate Insolvency

2010-09-22T14:47:00.000-07:00

Unfortunately, corporate insolvency or financial stress is fairly common in the business world, but being aware of the process and your rights and obligations can help ease the process.

When a business fails, the company either:

goes into receivership
enters a compromise with its creditors
is put into liquidation.

Receivership

In line with receivership law, companies may offer security against their assets such as plant and equipment in order to obtain finance or improve cash flow. If there is a default, the creditor or debenture holders (usually banks) can appoint a receiver to collect and sell the asset in which they have a security interest. Receivers are often appointed by a Court and their powers and duties are outlined in the Receiverships Act 1993.

Receivership can sometimes allow the restructuring and re-evaluation of a company, and does not always mean the end of the business. However, as secured assets are often important to the operation of the company, their sale could mean that it is impossible for the company to continue trading. If this occurs, company liquidation often follows.

Compromises with creditors

Effectively, a compromise is an agreement between a company and its creditors. Most compromises have two features:

creditors will be paid their debt in part or full over an agreed period
during the compromise term, debts are frozen and a creditor cannot take any action against the company.

A compromise can be an effective alternative to receivership or liquidation, and may give the company an opportunity to recover.

It is recommended that an independent compromise manager be appointed to manage the proposal. Also, it is crucial that all documentation is professionally prepared, comprehensive, and complies with the Companies Act.

If a compromise does not have a successful conclusion, a company may be put into liquidation by its creditors.

Liquidation

There are two types of liquidations: voluntary (by shareholders’ resolution) or compulsory (by court order).

A company is placed in liquidation once a liquidator is named. This usually occurs through one of three methods:

a special resolution of the shareholdersa decision of the board of directors following an event specified in the constitution to cause
liquidation
a Court order following an application by a creditor of the company.

The receivership, creditors’ compromises and liquidation of companies are governed by a complex set of statutory rules. We have only touched on some of the basic principles here and recommend you seek good legal advice at all stages.

Understanding Property Law

2010-07-12T19:15:00.000-07:00

There are many aspects to property law that you may wish to consider. As with other aspects of law, this is one area where planning in advance can reap benefits:

Trusts

A trust is a written agreement between you and people you trust (the trustees). You appoint trustees to look after your assets and/or other personal affairs. The trustees hold the assets you have transferred into your trust on behalf of the beneficiaries.

Trusts can generally be divided into charitable and private trusts. A private trust is created for the benefit of one or more individuals (beneficiaries) named by you. These types of trusts are useful for preventing disputes within families or interested groups, and protecting you, your beneficiaries and your assets from risks such as future estate duty, residential care, business risk or matrimonial disputes.

Asset protection is often an important reason for creating a trust, particularly for those who own a business or are contemplating marriage. With the new provisions of the Property (Relationships) Act of 2002, a trust may be a wise step for you to ensure your assets are protected in the future.

Wills

Another aspect of property law is wills. It is important that you prepare a will before it’s too late. By doing so, you ensure that your assets are distributed according to your wishes. You can specify who you’d like to provide for, care you wish to arrange for any children under 18 years of age as well as funeral plans. It also gives details of an executor and trustee to carry out your wishes.

The executor and trustee are responsible for your estate administration, which begins once you pass away and concludes when all aspects relating to the will are completed. Estate administration often requires specialist skills due to an increasing amount of claims that can be made against a will. Discuss this with your lawyer at the time of making your will, as you may wish to consider legal representation.

Related to this matter are enduring powers of attorney, which are a legal documents giving someone you nominate the power to act for you if you lose the ability to make decisions yourself. There are two types of enduring power of attorney. One is for your money and property affairs, and the other is for your personal care and welfare. Without an enduring power of attorney, no one else can deal with your affairs on your behalf, which may result in your spouse or family having to go to court to achieve this.

Property law is all about acting now, while you have time up your sleeve. At Smith and Partners, we have specialist lawyers in all aspects of property law ready to help.

Buying or selling a property?

2010-06-28T16:34:00.000-07:00

Sale and purchase agreement is always used whenever you purchase or sell a house in New Zealand.

The most common ways people buy or sell houses are by auction, tender, negotiation, or fixed price. Sales can be made privately or with the assistance of a real estate agent. Regardless of whichever path is taken, you must always have a written agreement for the sale and purchase of real estate.

A sale and purchase agreement is a legally binding document, and sets out all the agreed terms and conditions for both the seller and purchaser. Among other things, a standard property contract includes the names of the vendors and buyers, address of the property, type of title, chattels, agreed sale price, conditions of sale and the unconditional and settlement dates for the transaction. It is important that your lawyer always checks the sale and purchase agreement before you sign it.

Most sale and purchase agreements contain conditions that need to be met before the transaction can go ahead. Common conditions include the purchaser seeing and approving a Land Information Memorandum (LIM) or building or valuer’s report, or gaining suitable finance. A lawyer’s advice is often invaluable in assisting a purchaser to determine whether these conditions have been met satisfactorily.

The term used to describe the legal work involved in a property transaction is conveyancing.

Typical conveyancing work that a lawyer carries out includes:

Checking the title to the property
preparing mortgage documents and facilitating loan arrangements between the client and their bank
preparing Authority and Instruction forms (the document that transfers ownership from the vendor to purchaser)
checking all rates and other costs are paid for checking insurance has been arranged by the purchaser
conducting a ‘guaranteed search of title’ from the Land Information Office. This protects
the purchaser from any other claims over the property for a period of eight weeks (two weeks before and six weeks after settlement date)
completing settlement (paying the settlement funds in exchange for clear title)

While some vendors/purchasers may be tempted to cut costs by bypassing a lawyer, this could end up being a costly decision. Property lawyers are skilled and their advice can be invaluable, particularly if there are joint ownership issues, you are part of a de facto relationship, or if a vendor or purchaser fails to settle.

Conveyancing costs are quite reasonable, and can save a lot of stress and heartache in one of the biggest financial decisions you may ever make. If you are looking to purchase or sell property, contact Smith and Partners to make sure your interests are protected right from the start.

Welcome

2010-06-24T18:51:00.001-07:00

Welcome to the Smith and Partners blog. We will be regularly posting about legal issues relevant to New Zealand businesses. Follow us on Twitter @smithpartners for the latest law news.

Smith and Partners are a West Auckland law firm with an experienced legal team. We work legal matters including civil cases, employment disputes and contracts, corporate legal matters, family law and property law matters.

This blog is geared towards buisinesses and individuals looking for a resource for legal advice related to employment, property and commercial law.